Techs brace for opening slide

Chips, Sun slump; Biogen blasts off

EmilyChurch

NEW YORK (CBS.MW) - Pre-open tech investors are bracing for an opening sell-off after Goldman downgraded the chip equiqment sector and as Sun Microsystems dipped amid some cautious broker comments after the computer maker said it wasn't seeing much pickup in customer spending.

Contributing to negative investor sentiment was the downward revision of first quarter U.S. GDP. The Commerce Dept. said the economy grew at a 5.6 percent clip, down from 5.8 percent estimated a month earlier. The revision was due to weaker business investment, lower government spending and slower consumer spending on durable goods.

Meanwhile, Biogen soared after the resumption of trading - it had been halted since 8:00 a.m. ET on Thursday.

Chip, Sun weakness weighs on techs

Goldman Sachs lowered its rating on the U.S. chip equipment sector to "market weight" from "market overweight," and downgraded each stock in its coverage universe, citing recent stock outperformance despite intermediate-term fundamental concerns. Analyst James Covello said he feels "more comfortable on the sidelines" until the end-demand outlook becomes clearer.

Sun slides

Sun Microsystems on Thursday affirmed expectations for a profit when its current quarter ends in June, but CFO Mike Lehman said Sun's order rate this far in the quarter is "slightly behind" the rate experienced this far into the previous quarter. See full story on Sun Micro's outlook.

UBS Warburg lowered its fourth quarter revenue outlook to $3.2 billion, marking a 3 percent quarter-on-quarter growth, from an earlier estimate for 3.4 billion. The broker also cut its earnings per share estimate for the fourth quarter to null from 1 cent.

Warburg again flagged Sun Micro payments to AOL Time Warner
AOL
telling clients "we remain unable to resolve accounting for payments to AOL as part of the iPlanet Strategic Development and Marketing Agreement. Disclosures in the 10Q are unclear."

Merrill Lynch notes that Sun has announced lower bookings for the second quarter in a row. "We believe the enterprise spending environment has changed little. Sun is seeing some strength in government and health care, but competition (mostly with IBM
IBM, -1.52%
) remains acute," the broker said. Merrill kept estimates for the fourth quarter at 1 cent a share, but slightly lowered revenue expectations to $3.3 billion from $3.37 billion and kept a 'natural' ratings cap on the stock.

'Cubes' clipped

The "cubes"
QQQ, -2.06%
a tracking stock for the tech-friendly Nasdaq 100 Index
$NDX
fell 31 cents, or 1 percent, to $31.72 over the Redibook ECN.

Biogen blasts off

Biotechs Biogen
BGEN
soared $8.38, or 21 percent, to $48.70 after an FDA advisory panel voted Thursday to recommend Biogen's experimental treatment for psoriasis. Biogen's stock was suspended pending the news, but the Amex Biotech Index
$BTK
had rallied 7 percent on Thursday. See full story on biotech stocks and Biogen.

Teva Pharmaceutical Industries
TEVA, -2.34%
rallied $1.47, or 2.2 percent, to $68.50 after the generic drug maker received a favourable ruling from a U.S. judge, who invalidated GlaxoSmithKline's
GSK, -0.34%
three patents on antibiotic Augmentin. Glaxo is appealing; its stock dropped 6 percent Friday in London after the drugmaker warned on the potential hit to profits on the ruling. See full story.

Providian pummeled

Shares of Providian Financial
PVN
dropped 72 cents, or 9.3 percent, to $7 over Redibook after Fitch Ratings lowered consumer lender's senior debt rating to "B" from "B+," and kept a "negative" outlook on the rating.

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